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Why Is Big 5 (BGFV) Down 17.1% Since Last Earnings Report?

Blackstone Group (BX) closed at $40.65 in the latest trading session, marking a -1.22% move from the prior day.

It has been about a month since the last earnings report for Big 5 Sporting Goods (BGFV). Shares have lost about 17.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Big 5 due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Big 5 Sporting Q4 Loss and Sales Match Estimates

Big 5 Sporting reported fourth-quarter 2018 results. The company incurred an adjusted loss of 16 cents per share in the quarter, which matched the Zacks Consensus Estimate. The reported figure also compared favorably with a loss of 62 cents per share incurred in the prior-year quarter.

Q4 Highlights

Net sales grew 1.7% to $247.1 million and came in line with the Zacks Consensus Estimate. Further, comps rose 1.1% in the quarter under review. Comps declined in low single-digits in October and November but increased in mid-single-digits during December. Moreover, the company witnessed a marginal rise in customer transactions and average sale during the fourth quarter.

While comps rose in high single-digit range at the apparel category, it was up low single-digit range at the footwear category. However, the metric declined in low single-digits range at hard good category due to persistent weakness in firearms-related products.

Selling and administrative expenses, as a percentage of sales, decreased 240 bps to 30.9%. Further, total selling and administrative expenses declined $4.5 million to $76.3 million owing to lower asset impairment and contract termination charges, and decrease in advertising costs.

Moreover, the company recorded operating loss of $5.9 million compared with $7.9 million in the year-ago quarter.

Financial Position

Big 5 Sporting had $6.8 million in cash, long-term debt of $65 million and total stockholders’ equity of $174.9 million as of Dec 30, 2018. The company generated $24.5 million cash from operations in 2018. The increase in operating cash flow mainly reflects a decline in funding from merchandise inventory and prepaid charges in relation to rent.

The company’s capital expenditures, excluding non-cash acquisitions, totaled $15.5 million in 2018. For 2019, it expects capital expenditures of about $12-$16 million.

Concurrently, Big 5 Sporting announced a quarterly cash dividend of 5 cents per share, payable Mar 22 to its shareholders of record as of Mar 8, 2019.

Store Update

Big 5 Sporting, which belongs to the Retail-Miscellaneous industry, opened one store while shut one in the fourth quarter. As of Dec 30, 2018, the company operated 436 namesake stores.

In the first quarter of 2019, management does not intend to inaugurate any stores and plans to shut three. However, it intends to open about five stores and close four in 2019.

1Q19 Guidance

Management issued guidance for first-quarter 2019. Comps are now projected to grow in the mid-single-digit range. Further, earnings per share are anticipated to be 4-10 cents against a loss of 6 cents incurred in first-quarter 2018.

Notably, the first-quarter guidance reflects an expected favorable impact of the calendar shift of the Easter holiday from first-quarter 2018 and into second-quarter 2019. Based on the estimated sales and year-over-year fall in inventory in the first quarter, management projects quarter-end debt levels to fall below $50 million versus $68.9 million at the end of first-quarter 2018.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

Currently, Big 5 has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Big 5 has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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